Gerdau Has Best 2-Day Gain Since 2008 on Steel Price Rise

Gerdau SA (GGBR4) had its biggest two-day gain in more than six years as Brazilian steelmakers were said to prepare to raise prices.

Latin America’s largest steelmaker advanced 20 percent in the past two days, the most since October 2008 and the best performance among 43 companies on the BI Global Steel Producers index.

Gerdau, Cia. Siderurgica Nacional SA, and Usinas Siderurgicas de Minas Gerais SA together with ArcelorMittal SA are seeking to boost flat steel prices in Brazil between 5 percent and 8 percent this month, a person with knowledge of plan said today. Gerdau is planning an increase of as much as 10 percent in the price of long steel, used in construction, said the person who asked not to be named because the decision isn’t public yet.

Gerdau benefits from a fall in Brazil’s currency, which declined 11 percent last year against the dollar. Pricing power is starting to shift in favor of Brazilian steelmakers, Grupo BTG Pactual analysts led by Leonardo Correa wrote in a note today. Gerdau is trading at a 20 percent discount to peers, leaving space for a further recovery, according to the note.

“Price hikes seem a concrete possibility,” the analysts wrote. “Gerdau’s asset diversification has helped sustain its results through a difficult year and its U.S. business has the strongest outlook heading into 2015.”

Representatives for Gerdau, CSN, Usiminas and ArcelorMittal declined to comment on pricing.